CFOs Say CEOs Could Have Been Unaware Before SOX
A recent survey by CFO Magazine, raises the possibility that CEOs may not have been aware of financial shenanigans going on within their firms prior to the Sarbanes-Oxley Act (SOX) of 2002. Only 14 percent of financial executives surveyed believe major financial fraud such as those that brought down Worldcom, Enron and others, could occur without the CEO being aware of it today.
Of the 314 senior financial executives surveyed, 95 percent say their CEO is involved in the decision-making process when it comes to making corporate financial decisions. CEO involvement has increased since SOX went into effect according to 46 percent of those surveyed.
The financial executives also said their CEOs had a good or excellent understanding of six areas of financial management including:
- Revenue Recognition (78 percent)
- Balance Sheets (71 percent)
- Cash Flow Statements (63 percent)
- Internal Controls (56 percent)
- SEC Disclosure Requirements (48 percent)
- Off-balance-sheet Financing (42 percent)
The financial executives surveyed may have been willing to cut their CEOs a break but not the top managers at scandal-ridden Worldcom, Enron or HealthSouth. Eighty-one percent of those surveyed think it’s unlikely that Enron’s Ken Lay and Worldcom’s Bernie Ebbers were unaware of the fraud going on at their firms. Even more, 83 percent, think Richard Scrushy was unaware of the fraud at HealthSouth.